Why Shares of Coty Inc Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Coty Inc  (NYSE: COTY  ) were looking dazzling today, climbing as much as 13%, and finishing up 7% after reporting second-quarter earnings.

So what: The beauty-products maker matched earnings estimates with a profit of $0.28 a share, while revenues fell 4.1%, to $1.32 billion, but still topped expectations of $1.3 billion. Given the heavy promotional environment in retail, analysts had expected a relatively weak holiday performance. Investors seemed to be jazzed by the board's decision to authorize a $200 million share buyback program, which is about 3.5% of shares outstanding.  

Now what: While the share repurchases seem like good news for investors, it doesn't seem like enough to warrant such a spike in the stock. CEO Michele Scannavini even called the quarter "challenging," noting softness in the U.S market due to the difficult retail environment. Still, emerging market sales grew 6% in the quarter, showing that not all segments of the business suffered; but management said it expected the general softness to continue for the remainder of the fiscal year. Shares likely jumped simply because investors were expecting even worse. 

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  • Report this Comment On February 18, 2014, at 11:02 AM, ffbj wrote:

    The only reason to buy Coty is that there is no reason to buy Coty.

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